Best asset allocation for a college student?

My niece is a college student who got a settlement for $150,000 and wants to use it primarily to generate income to help pay for living expenses while she is in college. Should she use the typical "income" asset allocation model of 65% bonds, 15% stocks, 20% money market? And would it be more lucrative for her to refinance on her fully paid for $185,000 home and add that money to the investment portfolio? Or would the new mortgage not make it worth while?

Never take out a loan to invest. If you happen to lose the money in the investments, now you just have a loan. It's way better just to have a paid-for house and no mortgage for the rest of your life.

I'd say a college student, first of all, needs this money in a trust where she can't get at it until she's 30. Even if she's responsible and level-headed, she will be more so in 8-10 years.

Then I'd say invest the money primarily in government-backed securities like municipal bonds or treasury bonds. Invest some in stock funds, but not individual stocks (more likely to go under). I don't think you really need any in cash (i.e., money market) if you go with my 10 year time-horizon suggestion.

Thanks and Good Luck!

with 150k to play with she should be able to invest in fairly non risk inventory that will bring he a unearned income of about 16500 per year. so she who have after taxes about 15k to live on. i would try that and not touch the house. the market is too flackly right now and money is getting tighter every day.

Read the Rich Dad Poor Dad Series immediately

She is young so it's a waste of valuable TIME to make such a conservative investment in mostly bonds and guaranteed income. Put more in equity so it can grow more over time because she's young and she has lots of it. Think more about a 60/40 of equity to bonds or even 75/25. Individual years may be up and down but overall it will do better.
Yeah and I think it's a bad idea to borrow against the house you live in if you want to invest. Maybe get a second house and borrow against that.

The term is too short for investing even partially in shares. Invest for max.safe income, in a bank or building society deposit,. The income will be about $8,000pa.

If that is not enough, you can borrow at lowest interest by taking a mortgage on the property, but take the minimum sum to live on, not to invest for extra income. That should never be done.

I think thats a good portfolio for her purposes right now. But, instead of the money market I would go with short term CD's. And dont borrow against the house for investing.